President Biden’s Administration, including the United States Department of Labor (DOL), have clearly expressed their belief that the minimum salary employers are required to pay to their exempt employees needs to be increased. On June 21, 2022, the Biden Administration released its Spring 2022 Unified Agenda of Regulatory and Deregulatory Actions. Related to this Agenda, the DOL announced its intent in October 2022 to issue proposals related to white-collar overtime exemptions. It is anticipated that the DOL will propose an increase from the current minimum salary amount of $684 per week.
By way of background, under the Fair Labor Standards Act (FLSA), non-exempt employees are required to receive overtime compensation of at least one and a half times their regular rate of pay if they work more than 40 hours in a workweek. The FLSA does, however, allow for possible exemptions from the overtime requirements, the most common of which are the “white collar” exemptions when the employee’s duties meet certain tests and the employee is paid a salary of at least $684 per week.
Over the years, the minimum salary requirement for the exemption has been increased. The Obama Administration attempted to raise the minimum salary requirement from $455 per week to $921 per week. The proposed salary increase was enjoined by a U.S. District Court judge. While the decision was on appeal, the Trump Administration withdrew the proposed increase and instead increased it to $684 per week, which is the current standard.
At this time, it is unknown what increased amount the DOL will propose and whether the DOL will propose other changes to the exempt definitions. Following its announcement, the DOL will allow a period of time for interested parties, of which there will be many, to provide their comments. Following the comment period, the DOL will consider the input and then issue its final rule, which will include an effective date. Following the issuance of the final rule, lawsuits may be filed to contest its implementation.
Following the release of the DOL’s proposal, the firm will update this alert. Even though there will be a period of time following issuance of the DOL’s final rule before it becomes effective, which also might be subject to legal challenges, it is still a good idea for employers to review how an increase in the minimum salary level will impact their companies and employees, who are currently covered under an exemption.